Correlation Between Regional Management and MarketAxess Holdings

Can any of the company-specific risk be diversified away by investing in both Regional Management and MarketAxess Holdings at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Regional Management and MarketAxess Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Regional Management Corp and MarketAxess Holdings, you can compare the effects of market volatilities on Regional Management and MarketAxess Holdings and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Regional Management with a short position of MarketAxess Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Regional Management and MarketAxess Holdings.

Diversification Opportunities for Regional Management and MarketAxess Holdings

-0.11

Correlation Coefficient

Regional Management  MarketAxess Holdings

Good diversification

The 3 months correlation between Regional and MarketAxess is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Regional Management Corp and MarketAxess Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MarketAxess Holdings and Regional Management is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Regional Management Corp are associated (or correlated) with MarketAxess Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MarketAxess Holdings has no effect on the direction of Regional Management i.e., Regional Management and MarketAxess Holdings go up and down completely randomly.

Pair Corralation between Regional Management and MarketAxess Holdings

Allowing for the 90-day total investment horizon Regional Management Corp is expected to under-perform the MarketAxess Holdings. In addition to that, Regional Management is 1.16 times more volatile than MarketAxess Holdings. It trades about -0.06 of its total potential returns per unit of risk. MarketAxess Holdings is currently generating about -0.02 per unit of volatility. If you would invest  22,442  in MarketAxess Holdings on December 30, 2024 and sell it today you would lose (767.00) from holding MarketAxess Holdings or give up 3.42% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Regional Management Corp  vs.  MarketAxess Holdings

Regional Management Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Regional Management Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

MarketAxess Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days MarketAxess Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, MarketAxess Holdings is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Regional Management and MarketAxess Holdings

The main advantage of trading using opposite Regional Management and MarketAxess Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Regional Management position performs unexpectedly, MarketAxess Holdings can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in MarketAxess Holdings will offset losses from the drop in MarketAxess Holdings' long position.

The idea behind Regional Management Corp and MarketAxess Holdings pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.